Does Your Supply Chain Move at the Speed of Customers?
By Michelle Covey
Imagine the heart of a city: traffic on the roads, people exiting a bus as they head to work, a vendor on the sidewalk selling flowers. Or picture a quiet, suburban neighborhood with someone walking a dog, kids riding bikes and the hum of a lawnmower. No matter where you are, the scene likely also includes passing trucks from DHL, FedEx, UPS, the postal service and a variety of regional parcel carriers. With the ever-escalating amount of e-commerce shopping, the number of delivery vehicles on the roads continues to skyrocket. Unfortunately, many of them also are facilitating costly returns because a product turned out to be nothing like its online representation.
The e-commerce boom is in full swing, so accurate deliveries are becoming ever more essential. There is pressure to create an exceptional customer experience, and winning the last mile is a huge part of this challenge. To avoid added costs, inefficiencies and errors, industry trading partners must collaborate on scalable methods and systems for channel consistency or risk falling short of competitors who get it right.
Recognizing that fulfillment now demands a more modern approach, smart supply chain professionals are working to create standardization that can drive efficiencies and expand sales opportunities across networks. They are focusing on three key areas related to last-mile success:
- Enhance real-time inventory visibility using item-level radio frequency identification (RFID) tagging.
- Optimize the business processes most closely related to fulfillment.
- Improve the accuracy and completeness of product information with best-practice guidelines.
Real-time stock keeping unit (SKU)-level inventory visibility and accuracy makes supply chains nimbler. This can be seen at retailers such as Macy’s, which, according to Forbes, has been leveraging RFID for several years as afoundational component of its omnichannel operations. In her Forbes article, “Is The ‘RFID Retail Revolution’ Finally Here? A Macy’s Case Study,” Barbara Thau writes that the retailer plans to expand its use of RFID to track every item across its fleet of stores and fulfillment centers. Since the start of this initiative, Bill Connell, Macy’s senior vice president of transportation, told Thau that his company has noticed “a big impact” on sales and profitability across several product categories from RFID.
The story notes that the RFID Lab at Auburn University has found that the technology raises inventory accuracy from an average of 63 percent to 95 percent and reduces retail out-ofstocks by as much as 50 percent. RFID also can help ensure that a company does indeed have an item in stock before fulfilling an online order. Plus, complete and accurate product information gives consumers a fuller picture of what they are buying, which reduces the incidence of costly returns.
Like Macy’s, numerous retailers are publicizing their efforts to optimize their supply chains for speed, agility and improved customer experiences. Many achieve these objectives through the implementation of item-level RFID for an enhanced view of inventory quantities and their locations — from the factory floor to the fulfillment center, store shelves or a truck heading to the consumer. In addition, many retailers are starting to request that items be RFID tagged at the point of manufacture. With this kind of visibility, retailers can find a manufacturer’s products more quickly, enabling them to fulfill orders faster.
Some manufacturers are responding by implementing source-tagging, which enables trading partners to gain inventory visibility via the sharing of data through their disparate systems. This is critical to making products available for the consumer regardless of the path to purchase. Impressively, Auburn University’s RFID Lab reports that the use of item-level RFID tagging in manufacturer systems alone delivers an 80 percent improvement in shipping and picking accuracy and improves receiving time by 90 percent.
The recent Localz and eyefortransport supply chain business intelligence whitepaper, “Last Mile Logistics,” includes feedback from supply chain, logistics, retail and manufacturing executives. The report reveals that the top challenges associated with the last mile include delivery efficiency, managing customer expectations and last-mile visibility. When asked what customers are demanding most, fast delivery (same or next day) and full visibility were the major concerns.
This study is just one indicator of a larger issue associated with the last mile: the discrepancy between what the consumer wants and what supply chains can actually deliver. For instance, while customers believe that two-day shipping should be free, fulfillment costs per order have risen 31 percent in the past year due to investments in omnichannel capabilities, according to the National Retail Federation’s “State of Retailing Online” report. For industry to move at the speed of the consumer, there is no room for waste — and optimizing the business processes that feed fulfillment will be key to closing the gap.
Another key consideration is the significant increase in the volume of returns. As a result of this trend, e-commerce logistics costs, as a proportion of sales, are predicted to continue to rise in the next few years, according to the “Global e-commerce Logistics 2017” survey released by Transport Intelligence. Again, it’s clear that holistically driving waste out of the supply chain is essential to ensuring fewer unnecessary costs are added to a system already forced to absorb more.
With particular relevance for last mile, more automation based on standards at the fulfillment center contributes to on-time, accurate deliveries. Inefficiencies such as mispicking can cause fulfillment centers to lose as much as $400,000 every year, according to research by Honeywell. Standards enable the alignment of trading partner data to power RFID, bar code scanning and robotic systems used during fulfillment. These tools help supply chains ensure that the product picked from inventory is the correct one leaving the fulfillment center or warehouse.
Best-Practice Guidelines in Action
To keep customers happy and decrease the likelihood of costly returns, leaders at footwear brand J. Renee knew it would be critical to provide their shoppers with accurate website images, product descriptions and deliveries. After all, superior online and delivery experiences are even more essential in a space where people cannot feel or try on the product in person. These inefficiencies were further exacerbated by the sheer number of website images J. Renee must aggregate from each brand the company works with. The existing manual processes were far too time-consuming.
In an effort to improve its capabilities, the business chose to focus on effective collaboration with trading partners, particularly with regards to the quality of product information made available to consumers. This began with J. Renee professionals working to reduce the complexities of image sharing through the development and implementation of the Release 3.1 GS1 U.S. Apparel and General Merchandise Best Practice Guideline for Exchanging Product Images and Attributes. (See sidebar.)
“For each shoe we make, we may have as many as 70 images attached to it to meet the needs of our various retail partners,” explains Coby Sparks, chief information officer and chief operating officer for J. Renee. “With as many as 60 styles produced in any given season, you can see how the need for guidelines was at the top of our wish list.”
The delays and duplication of effort were greatly reduced with the industry’s conformity on a standardized way to present images and data attributes. Though it seems simple, the agreement to state “.jpeg” as the preferred electronic format, for example, has been invaluable. Clear instructions for color designation, sizing in dimensions and pixels, clipping path, backgrounds, orientation, white space and other technical specifications also significantly streamlined J. Renee’s processes. Today, with greater efficiency and accuracy in its supply chain, all of the company’s partners are benefiting.
Win the Digital Marketplace
With the need for ever more consumable and extended data, supply chains must transition from inefficient, time-consuming and often manual data-management processes and automate operations in order to better anticipate what consumers want. As fulfillment continues to grow in complexity, the need for the standardization of processes will be an essential part of ensuring efficiency and staying competitive. Walmart and Amazon are raising the stakes daily and creating an unprecedented digital marketplace. The most agile, forward-thinking supply chains will win the race.
SIDEBAR: Best Practices for Better Supply Chains
A retail industry workgroup focused on product information and images recently expanded a widely used guideline that is designed to ensure consistency from digital experience to physical product delivery. The Release 3.1 GS1 U.S. Apparel and General Merchandise Best Practice Guideline for Exchanging Product Images and Attributes provides detailed guidance on how to create, manage and supply product images and data attributes for use in commerce applications across retail operations.
It also includes
- an attribute for California’s Proposition 65 law, which regulates substances that may cause cancer or reproductive toxicity
- electronic data interchange information for images
- guidelines for montage and 360-degree images, as well as 127 new attributes, bringing the total available attributes to 193
- a matrix showing product types applicable to attributes and examples of attributes
- in-document searches and navigation by enabling a hyperlink from the attribute in the matrix to its applicable definition or code list.
The 193 product attributes include product characteristics such as handmade, reversible and dishwasher safe, as well as best practices for presenting montage and 360-degree images online. This additional information extends beyond the traditional supply chain data already exchanged between retail buyers and sellers and supports a consistent online consumer experience.
About the Author
Michelle Covey is vice president of retail apparel and general merchandise at the neutral, nonprofit GS1 US. She leads the GS1 US Apparel and General Merchandise Initiative, which aims to help users deliver the right product to the right place at the right time. Covey may be contacted at firstname.lastname@example.org.